Many Americans dream of starting a business, and you probably know someone who has done it. Starting a business is hard work, and we don't need to tell you that. In fact, approximately half of first time business owners will end up closing their doors after 4 years of a commitment.
Strategizing to grow your business and keeping up with your competitors is tough, and it can be even more stressful if you have student loans to worry about. If you're in the spot to raise capital for your business, you could also end up being turned down due to your student loan burden.
Considering 44 million Americans have student loans which make up our country's $1.5 Trillion student debt problem, the good news is that there's more student borrowers who try to create their own business than you think, so there's multiple tried and tested ways you can try out even if you're personally burdened with student loans.
You would want to understand all your options when executing your strategy as a business owner, so it's equally as important to understand some of the options you have for battling your personal student loans while running a successful business, so keep reading for our helpful tips below.
1. Raise capital from people you know
You can choose to not go with a traditional business lender if you've applied to some in the past and have been rejected.
Just as you would first look to family and friends for a co-signer if you were refinancing your student loans, try to raise seed capital from friends you know or close family members before you begin submitting formal applications to take out a business loan.
2. Tap into crowdfunding opportunities
If you're past the stage where you can ask friends and family for seed capital, try looking into online lending platforms and marketplaces such as Funding Circle, a peer-to-peer lending marketplace which allows investors to lend money directly to your small or medium-sized business.
In fact, Funding Circle was the first marketplace to use the process of peer-to-peer lending for business funding in the UK, and now operates in the UK, US, Germany and the Netherlands, so outside financing is available to individuals who also live outside the U.S.
3. Seek deferment
Deferring your student loans may be an option with your provider. If you have federal student loans, a deferment will allow you to cease making your scheduled federal student loan payments on a temporary basis. If you meet certain requirements and you can qualify for a deferment, it might make sense to defer your payments if you need the extra capital immediately to finance your business.
If your student loans are serviced with a private lender, you might be able to defer your loans if you get in touch with your servicer. In some instances, deferring your loans and resuming payments might be as simple as clicking a button, but keep in mind that the total interest on your student loan will increase when you start the loan deferral period.
4. Look into refinancing your student loans
Refinancing your student loans could help take out a good chunk in interest from your overall price on the loan and reduce your monthly loan payment. With the current macro environment still settling with record-low interest rates, many borrowers may be able to benefit by refinancing their student debt, especially if it was originated at a high interest rate.
Student loan refinancing also doesn't have any fees, as with refinancing of other debt, so it makes even more sense to take into serious consideration. Be sure to read our thorough 18-step guide before you start applying to private lenders to refinance your student loans, since refinancing your student loans may save you more money over the long run than refinancing something simple such as your car, so it also requires more due diligence up front.
5. Maintain a consistent payment history
Your overall credit payment history accounts for approximately 35% of your credit score, with your recent history naturally having a higher weight than your older history. If you missed a payment several years ago but you've paid on time since that single missed payment, your credit score will most likely have recovered.
Make sure you consistently keep up with your current student loan payments as having a single missed payment can reduce the chances of receiving external financing for your business.